Winds of change in banking culture

Eyebrows rose on Nov 4 when Finance Minister Ishaq Dar presented the Companies Bill 2016 to the National Assembly.

“The president of Pakistan is pleased to promulgate the Companies Ordinance, 2016, on Nov 11 in order to replace the Companies Ordinance, 1984,” the minister announced.

There were murmurs of disagreement: “Why did the government skip a thorough discussion of the document in the parliament and avoid putting it forth as an Act, instead of enforcing the new law through an Ordinance?”
After looking into all the benefits one is tempted to dig deeper in search of surprises

Mr Dar had an unconvincing answer: “So that the corporate sector may immediately benefit from the reforms”.

Corporate watchers thought that the urgency represented the government’s anxiety to extract greater details from foreign companies, details of their beneficial owners and their investments, either inside or outside Pakistan.
A few months ago, a young banker physically assaulted an elderly customer after an exchange of hot words at a branch of a big local bank.

The elderly man was saved by other bankers and he left the bank branch visibly upset. “The regional office of the bank investigated the matter on its own with the help of eyewitness accounts and CCTV camera footage. When their staff member was found at fault he was suspended,” according to one of the officers of that particular bank branch.

This, admittedly, is a rare case. But while branch level bankers may not be as cooperative with their customers, particularly those who need their assistance, as they should be, banking rules and procedures have become more demanding for customers.
Seasoned bankers admit privately that professionalism on the part of bankers has not measured up to the new challenges in banking

From filling out money transfer forms, pay-orders and companies’ dividend warrants to writing an application for reopening a suspended bank account, there could be many things a bank’s customer might seek help from the bank staff for.

How branch level bankers handle such situations depends largely on the ‘in-house’ training of a particular bank.

The 31st December deadline for banks to ‘revisit and align’ their employees’ training and development policy with a set of State Bank of Pakistan guidelines is fast approaching.

Some banks claim that they will meet the deadline but others say they may have to seek an extension. Regardless of how soon banks will finish this job, “what is important for them is to ensure that the spirit of the central bank’s specific guidelines is upheld in letter and spirit,” says a senior central banker. “We cannot dictate banks on the specifics of banking niceties when it comes to dealing with customers. But our guidelines are so designed that once banks’ individual policies on employee training are brought in line with them, bank customers would be better off.”

Seasoned bankers admit privately that professionalism on the part of bankers has not measured up to the new challenges in banking despite periodical introduction and frequent updating of the SBP rules and regulations.

“Take the anti-money laundering example. Banks have not been able to mitigate the risks of money laundering at the branch level. Alarm bells are raised at much higher levels,” says a former head of the National Bank of Pakistan.

“The reason is two-fold. First, branch level officers are not allowed to work freely with a spirit of professionalism and transactions are only allowed on direction from higher levels. Secondly, in many cases branch level officers are not capable of identifying attempts of money laundering in disguise.”

So a pertinent question is: how are banks ensuring that their employees, at all tiers of management and operations, stay abreast with frequent changes in SBP rules and regulations aimed at making banking safer, more customer-oriented and transparent?

All banks have internal policies on compliance. They even have compliance cells or departments. But generally speaking one may get a more satisfying answer after banks have revisited and aligned their employees’ training and development policies in the light of the SBP guidelines.

“The reason is, these guidelines are probing in nature and are aimed at exploring whether bank employees are, and remain, capable of performing individual or group responsibilities in line with what is required of them,” according to an official of the Pakistan Banks Association.

He points out that the institution of Banking Ombudsman and the SBP department of Banking Conduct and Consumer Protection are doing a good job in that both “help us know exactly what is going wrong and where. And, their findings and verdicts in cases enable us to improve our operations.”

That is why, according to bankers, professionalism among bankers is growing even though examples of misconduct and lack of understanding of professional responsibilities keep popping up.

He proudly told this writer how an officer at a Karachi branch of his bank had visited an elderly couple, living miles away, for physical verification of their signatures when a cheque was presented to him for withdrawal of an unusually large sum of money from their account.

Central bankers say, and bankers agree with this assessment, that currently banks are facing challenges in three main areas with regard to being prepared for compliance of regulations.

The first area relates to their level of understanding of the changes being made in old regulations, or the new rules that are being introduced.

Second relates to a bank’s policy on how it ensures that changed or new rules are being absorbed by all those who responsible for the eventual execution.

Third is all about the level of motivation, or the lack of it, that can make or mar the fate of a banking assignment.

In these and other areas, a bank’s policy of incentivising professionalism matters a lot. That is why one of the clauses of the freshly issued SBP guidelines on bankers’ training and development require all banks ‘to encourage employees to obtain professional courses/ certificates relevant to their job requirements by allowing reimbursement of fees, rise in salary or lump sum rewards etc.’

The same clause also emphasises the need for linking performance appraisals, promotions and other benefits of banking jobs to training and additional certification.